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Lack of Tech Stocks Makes Investors Overlook Southeast Asia Indexes

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Key Points

  • The MSCI Asean Index is down 19 percent in 2020, loaded with so-called old-economy stocks such as those in the finance and real estate sectors, even as similar gauges for the Asia Pacific and world equities wiped out their year-to-date losses.
  • According to data compiled by Bloomberg, the poor show has also put ASEAN shares on course for their worst annual performance relative to global peers since 2013.
  • Technology stocks have been at the forefront of the March lows global equity rally as the virus outbreak has accelerated the global shift towards automation, and locked-down consumers have been driving demand for everything from video games to e-commerce.
  • Visit The Financial Today’s homepage for more stories.

As technology shares piggyback markets around the world to ride a startling rebound from their pandemic lows, Southeast Asian stock investors are proving to be mere spectators.

The MSCI Asean Index is down 19 percent in 2020, loaded with so-called old-economy stocks such as those in the finance and real estate sectors, even as similar gauges for the Asia Pacific and world equities wiped out their year-to-date losses.

According to data compiled by Bloomberg, the poor show has also put ASEAN shares on course for their worst annual performance relative to global peers since 2013.

“ASEAN is getting overlooked by some investors as it doesn’t have any big tech names like the U.S. and China,” said Nirgunan Tiruchelvam, head of consumer equity research at Tellimer. “As long as the tech rally lasts, Southeast Asia will continue to underperform due to a lack of those companies.”

Technology stocks have been at the forefront of the March lows global equity rally as the virus outbreak has accelerated the global shift towards automation, and locked-down consumers have been driving demand for everything from video games to e-commerce. ASEAN is missing as the tech and communications sector accounts for only about 11 percent of the MSCI gauge in the region. That’s versus a weighting of more than a third in the S&P 500 Index and about a fourth in the MSCI Asia Pacific Index.

Furthermore, excluding telecom companies leaves the technology space with only one company—Singapore’s Venture Corp.—with a weight of less than 0.8 percent in the Southeast Asian measure. Financial and real estate account for approximately 42 percent of the index.

“Given the high representation of cyclical stocks in the mix, short-term under-performance could sustain,” said Jingyi Pan, a market strategist at IG Asia Pte. Investors will “go about cautiously with these names amid the uncertainties,” she said.

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